David Rosenberg Calls For A Multi-Trillion, "Helicopter Money" Stimulus Package

With the inherent weakness in US GDP and the rising probability of a recession (two weeks ago Bank of America modeled that the next recession would likely start roughly one year from now), Gluskin Sheff's David Rosenberg thinks that with monetary options exhausted it will take a fiscal boost in the trillions of dollars to kickstart the economy. These issues were discussed in an extended interview with Real Vision TV, where the chief economist and strategist at Gluskin Sheff proposed some radical policies to engineer the growth needed in nominal income.

His ideas, some of which can be seen here in a clip of the interview, include helicopter money attached to a $2 trillion perpetual bond, massive infrastructure spending and measures to tackle the $1 trillion student debt load that has seriously hamstrung the economy.

Here are some of the interview highlights:

Doing the Same Thing Over Again and Expecting a Different Outcome

Whether the US will in fact experience the technical definition of a recession is a matter of fervent debate, with the odds something like 20%-30%, according to Rosenberg (60% according to Deutsche Bank), but with growth averaging around 1%, there is no doubt the economy is weak.

“There are some people saying a recession is here right now,” Rosenberg says, “I don't think that we meet those conditions yet. But people say, well, look. Twelve months in a row of negative year on year industrial production, that's never happened outside recession, check. We've had now going into six quarters of profit contraction, year over year. That's only happened in the context of a recession, check. I mean, all that is true, but so much of this has been related to the oil shock that we had.”

Rosenberg’s problem with monetary policy, now in its 7th year of unorthodox experimentation, is that it has become a weak antidote to structural problems in the economy (even if it is still quite potent at boosting financial asets). Fiscal policy on the other hand, if constructed right, could be the answer due to its very powerful multiplier impact. “I can't say that I know for sure, but it's the old Einstein adage about the definition of insanity,” Rosenberg said. “And we're finding that we're really-- if we're not hitting the wall on monetary policy, we're certainly seeing classic economics 101 of the law of diminishing returns.”

In terms of infrastructure spending, he said that one lesson from recent history and the Great Recession is that you've got to have the credibility to convince people that this is going to be permanent and not temporary, in terms of the impact on the economy. “So it can't be transitory. It's got to be very big. With interest rates as low as they are, there's certainly the capacity. I mean, you've got a lot of governments around the world issuing 50 or 100-year bonds. So this is a once in a lifetime opportunity to borrow money.”

A Couple of Trillion Dollars of Helicopter Money

While companies have been taking advantage of these conditions to borrow money, the funds have not been invested in the real economy. Share buybacks have become more popular, while personal savings rates have increased amid the economic uncertainty. This all boils down to a big case for government spending, with monetary policy joining forces with fiscal policy in the form of helicopter money.

“What you do with helicopter money is you finance it off the central bank's balance sheet because we're talking doing something very dramatic to reflate the economy,” Rosenberg said. “It's not a few hundred billion dollars. It's a couple of trillion...I know I'll get accused of bailing out the sinners, but, my lord, we've already done that. I mean, nobody went to jail.”

One of the things holding the economy back is the $1 trillion student debt load, which he said has left 35% of males aged 18 to 34 living with mom and dad, not getting jobs and not becoming first time home buyers. Employment growth for the 65s and over is 7%, meanwhile, as the aging boomers have to work longer because they didn’t save enough for retirement.

“Helicopter money is QE plus where, say, the treasury issues a perpetual-- call it, like, a century bond, a $2 trillion bond on the Fed's balance sheet. And so when that bond matures, it's, like, we're all dead in the long run at that point. And then the Treasury can use that money to stimulate growth. "

The beauty of this idea, according to Rosenberg is that you don’t have to go through Congress, with such difficulty in achieving corporate or personal tax reform. “It would lead to a permanent increase in the monetary base. Inflation expectations would go up, which means that real interest rates would go negative. And the theory is that that would provide a bigger thrust towards getting what we all want, which is sustainable and accelerating nominal income growth.“

Real Risk of Fed Mistakes or Trump Trade War

Sustainable and accelerating nominal GDP is certainly what’s required while the risk persists that we could be shocked into recession, or the Fed could make a mistake in raising interest rates too aggressively.

“That's what happened in December of last year. They raised rates 25 basis points, but the overall financial tightening, in terms of what it meant for the dollar or in credit spreads and the stock market, it was really, like, 75 basis points of tightening. And the next thing you know, the economy slows to stall speed."

Another concern for investors is the prospect of a Trump presidency, bringing with it the potential start of a trade war. That could provide the sort of exogenous shock to cause the economy to go into recession, Rosenberg stated, noting that historically all the recessions in the post war period have been created by the Fed.

“The problem is that when you have the economy running on average 1% growth, or 1% plus, which is not a big cushion. And so, you know, it's a complicated question to try and handicap a recession on us right now. There's a lot of people out there that are convinced that a recession is coming.”

To watch the full interview with David Rosenberg, visit Real Vision TV. You can access this and many more interviews with a free trial.

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Oh, if Rosenberg's idea gets traction - and execution - which it will eventually, as we have said since our first days in 2009, buy lots and lots of gold.

Aliens want to help humans but are afraid of violence on Earth, Apollo program astronaut Edgar Mitchell wrote to Podesta in 2015, citing an impending space war and the Vatican’s knowledge of alien life.

“Because the War in Space race is heating up, I felt you should be aware of several factors as you and I schedule our Skype talk,” wrote Mitchell, who died in February 2016.

The brazenness of these tribesmen is really quite breathtaking. They actually want us to believe that just dumping trillions more counterfeit paper on our economy will fix everything... that this "stimulus" is actual wealth. They've been deluding us for so long that they're actually starting to believe it themselves. Curse the lot of them forever.

Why not? SoZ. It’s been awhile since the Rosenbergs et al. got their last big dump, has’t it? They have to eat don’t they? They have to regain some of that Clinton donation money, don’t they? And make sure those students pay back those loans. Don’t they?

Now, to ignore the autistic child and get back OT: Bach, you are thinking about it backwards, it will fix everything -they will finally get hyperinflation and be in a position to get real assets from desperate people at what amounts to fire sale prices in exchange for ever more worthless scraps of 'promise backed' paper. The ((primary dealers of paper)) get to gobble everything up in exchange for worthless scrip that they literally printed from thin air.

I liked this bit: "And so when that bond matures, it's, like, we're all dead in the long run at that point"

Apart from the obvious ZH tag-line, to me it says a lot about a man when he is willing to sell out future generations rather than fix problems in the present. How could this outstanding plan NOT work?

I just wish the aliens would get here and sort all this out. If you are up to speed with The Culture, you will know that these things take time, and far greater Minds than ours have calculated all the angles, but from a dimwit's view at ground zero, it really does not look like the plan is working...

[If you don't know about The Culture, read any book by Iain M banks - you will thank me, I promise you]

Could it be that your response to toro is more well thought out and informative than the blog information below that you criticize?

The problem began at the Federal level when the US Government (USG) allowed the Federal Reserve System to come into existence, without any Congressional oversight and without Constitutional Ratification.

The Fed – as it is called – is a private institution disguised as Federal that creates money out of thin air. Its primary purpose is to enrich its secret and not so secret members via unlimited money printing. Its secondary purpose is to feed the USG’s gargantuan operations – at the right interest rate, of course.

Hence to the Fed money is its own end. It creates money to get money. And the reason it is so is because the con-artists who control it via their private banks made it so.

Hey toro, previously mofio then santafe then Aristotle of Greece then Gargoyle then bleu then oops then lance-a-lot then most recently Loftie.

You are a serial spammer and a serial pain in the ass. Might I politely suggest that you go fuck yourself? And get a life.

PS. You might have noticed that my attempt to expose you for what you are is always the same. That’s because your Spam is always the same (Using fake links to your BS site which has no connection to your comments; which are deliberately dramatic to mislead people into responding or clicking on the fake link) so it seems only fair that my exposure of your crap should also always be the same. An eye for an eye.

No kidding! And we can all die with our boots on -- the cowboy way. What better way to cap off living in the most propserous nation in the history of the earth at its zenith, and going out like a super nova. Count me in!

If they do 2T, you'd get about 6K. That's not even close to putting a dent into the black hole that is the average Joe's balance sheet. What the fuck are you going to buy with 6K that will save the economy? (Besides 3ish ounces for the smart ones?) All it's good for is to catch up on the bills and rent.

We need fucking manufacturing and other jobs that build up the middle class again. A one time boost does fucking nothing. Let the old companies die to make room for the entrepreneur. Small business made this country.

Of course that helicopter money wouldn't go to everyone in the US. My bet is that when they say helicopter money, they actually mean it will go to people that can afford a helicopter.

allow me to posit a thought, if I wanted to not just own alot of physical assets but ALL of them one way I could see this through is to pull another real estate bubble out the presidents ass, flood the country with free digital dollars, loan it out (even at historic low rates) to the walking dead, have them buy it high and crash the whole thing again and buy it all up like blackstone did the first time around except this time it will be the mother of all deflationary collapses. just a thought.

Relieving debtors of thier college debt sounds nice but all it does is act as a conduit to pay off the bankers who made bad bets and free's up a fresh CONSOOOOOMER to take on another loan for a new house, car or a lovely european vacation, wash rinse repeat.

"If the American people ever allow private banks to control the issue of their currency, first by inflation, then by deflation, the banks and corporations that will grow up around them will deprive the people of all property until their children wake up homeless on the continent their Fathers conquered.... I believe that banking institutions are more dangerous to our liberties than standing armies.... The issuing power should be taken from the banks and restored to the people, to whom it properly belongs."

It's part and parcel of 30 years of neoconservatism. For a generation, we've told people that government can't do anything other than basically private property rights (police, courts at home, bombing brown people around the world to protect Coca Cola's markets and property abroad). That's why we've seen an explosion in NGOs because we're told over and over again that governments can't do anything.

A generation has traded in political power for the mere possibility of influence. Worse still, is that the NGOs themselves are now fully corrupted by the monied interests that have basically destroyed government.

Helicopter money is just more of the same bankrupt ideas of neoconservatism in that we cannot expect elected leaders to DO THEIR FUCKING JOBS and instead give it to people directly to fritter away, most likely on paying down debt. Central banks, for all their flaws, have tried their best to fix the problems markets created. Central bankers are not leaders and were asked to do a job they shouldn't have been asked to do. Government, instead of putting forward sensible fiscal plans (or even to prosecute criminality), instead bailed out the people who created the problem in the first place. Even worse, instead of taxing them, they go to them and ask permission to borrow money (at interest).

To me, "helicopter money" is just another bank bailout by another name.

Aliens really exist, and I can assure all that they really do because I have Remote Viewed them, but I do not believe that they are benevolent. Moreover, they are so much more advanced than we are it would not be the type of relationship that civilization could tolerate given the power differential and difference between societies.

Let me do my best MDB impression since he isn't gracing us with his presence on this very important matter... Ahem...

Rosenberg is absolutely correct here. What is really needed for growth in a high tech modern liberal economy like ours is additional stimulus, and the only way we can stimulate is through motivation by a direct link of money from the fed to the people! The fed simply didn't do enough in 2008 but it wasn't their fault! Political pressure (get your act together congress!) from movements like the tea party and obsolete white Americans clinging to their religion and gun rights have been the biggest barrier to entry for the hardest working among us such as Womyn, Latinos, and African Americans. I fully support a "money drop" ($60-70 trillion should do the trick) to all Americans WITH LIMITATIONS and EXCEPTIONS to be fair. I would propose an additional 200-300% bonus for minorities and women and the LGBT community. Disenfranchised muslims should be our highest prioritiy with a 500% multiplier. Bonuses would of course roll over for each qualifiying category (for example, an African American Muslim Transgender from Syria with 3 children could then qualify for 800-1000% bonuses or more) Combined with an open border policy and citizenship for all middle eastern refugees, this will level the playing field of white privelidge and create the diversity in our companies we need to grow!

Of course, the only people who would buy such a bond would be central banks, pensions, and insurance companies. The little people still get stuck with increasingly worthless paper.

Except for the sheer scale of this wealth transfer, it's not too different from what is going on now. Govt bonds could never be paid off without triggering a deflationary collapse, so they just roll them as the debt keeps piling up. The perpetual bond doesn't have to be rolled so it can just stay on the books without causing any raised eyebrows from a failed bond auction.